How Can I Get Rid of Undesirable Clients?
There may come a time in a business owner’s life when they need to rid themselves of undesirable clients. However, firing a customer is much like firing an employee; therefore, it must be done so with caution.
A company must first assess the value of a client over the hassles associated with dealing with that customer. If the monetary gain is too little (or not at all), then a company may decide removing a customer is best.
Justifiable Reasons for Dismissing a Client
- Prolonged Accounts Receivable: If a customer carries a remaining balance, and that balance continues to increase without payments, nonpayment of accounts receivable is grounds for dismissing a client.
- An Overly Demanding Client: When your company cannot seem to please a client no matter what you do, the costs of trying to provide the service or product the customer wants may not be profitable.
- Deadline Issues: If you are offering a service to a client that hinges on the customer’s ability to meet a deadline, but they fail to meet that deadline, it may be in your best interest to dismiss that client. Otherwise, their inability to fulfill their obligations could negatively impact the quality of services you provide.
- Unethical Conduct: Whether a client lies to you or requests that you lie for them, this is grounds for dismissal.
How to Dismiss a Client without Legal Repercussions
First, you must review any contracts you have with that customer, and pay attention to the obligations your company must meet in that contract. With a binding contract, you must ensure all requirements have been met before you create and send a termination letter to that client.
If possible, offer a referral to the client so that they have options after their dismissal. Organize everything you have for the customer and place it in a file where you can easily retrieve it if the new company wishes to see the records.
When writing your termination letter, ensure that you are non-judgmental, and remain professional regardless of your reasons for parting. After the termination, it is imperative that you do not discuss the situation privately. Doing so could open your business to potential libel claims.
Most importantly, before terminating a client, have a business attorney review your contract to ensure all obligations are met, and that your termination is in accordance with the contract.
The business attorneys at Udall Shumway, PLC understand that there may come a time when you must dismiss a client. We are here to ensure that dismissal is sound and that your business does not endure any liability as a result.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Undesirable Clients, or any other litigation issues, please feel free to contact David R. Schwartz at 480.461.5325, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.